Earth economics studies the economy of our planet from the perspective of an autarkic system (a “closed economy”). It ignores the constituent national and regional parts of the planet economy and focuses on the whole. The book respects the heritages of IS/LM (Keynes) and neoclassical growth (Solow) not out of economic respect but because these tools are very useful in understanding the crisis and the policy response to that crisis.

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Thursday, December 14, 2017

World Inequality Report 2018

Economic inequality is
widespread and has been growing since the 1980s, calling economic
growth policies around the world into question, according to new
research from the World Inequality Lab. The study findings are
detailed in the first World
Inequality Report.

The full report is
available in English, but the 20-page summary is available in 8
languages: English, French, Spanish, German,
Russian, Arabic, Hindi and Chinese - wir2018.wid.world

The research relies on the most extensive database
on the historical evolution of income and wealth inequality.
It aims to contribute to a more informed global democratic debate
on economic inequality by bringing the most up-to-date and
comprehensive data to the public discussion.

has been
shared among individuals in the entire world since the 1980s,

with a
particular focus on emerging countries

where
inequality data had previously been sparse or nonexistent."

The primary research findings indicate that income inequality has
increased in nearly all world regions in recent decades, though at
different speeds, highlighting the important roles of governments
to mitigate inequality. Since 1980, income
inequality has increased rapidly in North America, China, India,
and Russia, while growing moderately in Europe. However, there are
exceptions to this pattern: in the Middle East, sub-Saharan Africa,
and Brazil, income inequality has remained relatively stable, at
extremely high levels.

Lucas
Chancel, general coordinator of the report, emphasized:

"The
fact that inequality trends vary so greatly among countries,

even when
countries share similar levels of development,

highlights
the important role of national policies in shaping inequality.

For
instance, consider China and India since 1980: China recorded

much
higher growth rates with significantly lowerinequality levels
than India.

The
positive conclusion of the World Inequality Report is that
policy matters, a lot."

The report also reveals the
dramatic decline in the net wealth of governments over the past
decades and the challenges this poses for tackling inequality.
Based on the data, the report discusses promising options to tackle
income and wealth inequality—starting with the importance of
economic data transparency.

Gabriel
Zucman, coordinator of the report, said:

"The
establishment of a global financial registry to record the
ownership

of
financial assets would deal severe blows to tax evasion

and money
laundering, and would enhance the effectiveness

of
progressive taxation, which is an essential tool in reducing
economic inequality."

The report stresses the need for more ambitious
policies to democratize access to education and well-paying jobs in
rich and emerging countries alike. Public investments
in health and environmental protection are also necessary to
empower younger generations. To finance these investments in the
future, capital taxes on the wealthiest or debt relief have
regularly been used by governments throughout history.

Key
results of the report include the following

- Strikingly, since 1980 the richest 1% captured
twice as much as the poorest 50% of the world's population.
In other terms, since 1980, 27% of all new income generated
worldwide were captured by the richest 1%, while the poorest 50% of
the world's population captured only 13% of total growth. These
figures are brought into sharp contrast considering the top 1%
currently represents 75 million individuals while the bottom 50%
represents 3.7 billion individuals. The population in between,
largely comprised of lower- and middle-income earners in North
America and Europe, experienced sluggish or even zero income growth
rates.

- Since 1980 there have been
large shifts in the ownership of capital. Who owns this capital is
crucial in determining inequality. Net private
capital--the assets of individuals minus their debts--has risen
enormously in recent decades, but conversely, net public
capital--the assets of governments minus their debts--has declined
in nearly all countries since the 1980s due to large scale
privatizations and rising public debts. Public capital is now
approaching or below zero in rich countries. This exceptional
situation by historical standards has strong implications on
policy. In particular, it becomes extremely challenging for
governments to invest in education, healthcare or environmental
protection.

- Wealth inequality among
individuals also increased sharply since 1980.
Significant increases in top wealth shares have been experienced in
China and Russia following their transitions from communism to more
capitalist economies. The top 1% wealth share doubled in both China
and Russia between 1995 and 2015, from 15% to 30% and from 22% to
43%, respectively.

Emmanuel
Saez,
coordinator of the report, stressed:

"The
combination of privatizations and increasing income inequality

has fueled
the rise of wealth inequality—within countries and at the global
level, private capital is increasingly concentrated among a few
individuals.

This rise
was extreme in the U.S., where the share of wealth

held by
the top 1% rose from 22% in 1980 to 39% in 2014."

- Global income and wealth inequality will
steadily rise if countries continue to follow the same trajectory
they have been on since 1980, despite strong growth in emerging
countries. By 2050, the share of global wealth held
by the world's 0.1% richest (representing 7.5 million individuals
today) be equal to that of the middle class (3 billion
individuals).

- However, rising global
inequality is not inevitable in the future and limiting it will
have tremendous impacts on global poverty eradication.
If all countries follow the same inequality trend as Europe since
1980, the incomes of the bottom half of the world population could
rise from €3 100 in 2017 to €9 100 in 2050. Alternatively, if
countries were to follow the U.S. trend, the incomes of the bottom 50%
would rise to just €4 500 by 2050.

The data presented in the report
combines in a systematic and transparent manner all available
economic data sources, including household surveys, tax receipts,
and income and wealth national accounts (including offshore leaks,
when available). This enterprise relies on the analysis of more
than 175 million data points on inequality.

Facundo
Alvaredo, coordinator of the report, said:

“This
enterprise relies, in one way or another, on the inequality
statistics

collected
in WID.world −The World Wealth and Income Database−

since its
inception as the World Top Incomes Database in 2011.

These
databases would not have been possible

without
the cooperation of more than 100 researchers around the world.”

World
Inequality Report 2018 Highlight

More about
WID.world

WID.world relies on the combined
effort of an international network of over a hundred researchers
from all continents...